Middle level Jobs that are outsourced are in computer and technology sectors. Companies that adopt outsourcing rendering former employees jobless lack public appeal and hence lose customers. American firms have recorded losses owing to the nature of substandard infrastructure in the host counties. Absence of integrated security management system in host countries could result to losses fro American firms. A case in point is the recent illegal transfer of huge sums of money from Citibank’s American customers’ accounts to a fake account created by employees of Emphasis, an Indian firm that managed Citibank’s processes (Curie, 2000, p. 18).
The security and safety of data when dealing with firms in host nations without advanced security infrastructure systems is compromised. Offshoring service providers can take advantage of the data they manage to collude with other firms and develop better products thus competing with the client firm. In such a scenario, the client firm loses its former business momentum owing to reduced sales. Job cuts, reduced income and less tax remittance to government agencies results. Offshoring will result to widening goods and services trade imbalances.
America’s dependence on foreign nations for crucial defense equipment and consumer products is accelerated by offshoring. Since 2002, America has recorded trade deficits in high tech technology. Such trade imbalances come from the offshoring of manufacturing processes and jobs. The us is gradually giving away its expertise with us corporations turning into mere best-seller brand names. Continued offshoring of high-tech and IT jobs is gradually undermining America’s superiority in innovation and technology.
The economic advantage of America over other nations is ultimately depleted. Limited job vacancies and the pressure exerted on wages discourage Americans from taking courses in engineering and science (Inkpen, 2006, p. 25). Offshoring poses a threat of divulging of sensitive information, for instance credit and medical data. Once exported, the US will rely on foreign powers to assist protect its classified information. A significant risk is posed to the safety of this information due to exploitation of weak legislation, loopholes and restricted access to implementation.
Service providers may be handling outsourcing assignments from many rival companies and this increase the risk of data leakages. A rival company that obtains information this way has better products than the competitor. The firm with better products draws all customers. The competitor most likely resorts to job cuts to cater for diminishing sales. Loss of jobs means more burdens on the government’s social support systems and reduced income (Saunders, 2004, p. 11).
Outsourcing can result to lower quality products due to substandard infrastructure in host countries. Lack of managerial oversight and control over the business processes by the procuring firm could also be a factor for poor quality services. Companies in the US that procure outsourcing from abroad will thus not get value for their money. This will translate to losses and hence lower economic returns. Expansion for such firms will be limited and hence little or no additional workforce is absorbed.
Extended time-to-market, hidden expenses, and unreliability among service providers is another undoing for outsourced products. A standardized model that is easy to duplicate is required by service vendors to enable smooth operations. Absence of this results into poor quality work. A service provider could also be rendered unable to honor their commitment due to political instability that is very prevalent in Third World countries, from where most outsourcing services are procured.